Cummins Stock And Two Dividend Growers Built For Higher Rates

The Fed’s hawkish turn, with rates held at 3.5 to 3.75% and the next move likely a hike, has quickly reshaped expectations for dividend stocks. Higher yields on cash and bonds can pressure income stocks, but solid dividend growth companies with healthy balance sheets can still play a role for investors looking for reliable cash flows and potential income growth. This article looks at three dividend growth stocks from our screener that appear well positioned against this new rate backdrop and are directly exposed to the latest Fed news, highlighting why each might deserve a closer look now.

Overview: Cummins is a century old US power solutions company that supplies engines, drivetrains, generators and zero emission technologies like batteries and fuel cells to truck makers, industrial customers, data centers and energy projects worldwide.

Operations: Cummins generates US$10.8b from Engine, US$10.0b from Components, US$12.6b from Distribution and US$7.8b from Power Systems, with smaller contributions from Accelera and intersegment eliminations, while the United States contributes US$18.7b of revenue versus US$3.5b from China and US$1.8b from India.

Market Cap: US$96.6b

Cummins stands out in a higher rate world because it couples decades of uninterrupted dividend growth with a business that is tied directly to real economy demand for power and equipment. The Fed’s more hawkish stance tends to favor companies with solid cash generation and Cummins fits that profile, supported by return on equity of 20.8% and an outlook for improving margins and earnings. Its growing exposure to data center and microgrid power, highlighted by multi gigawatt agreements such as the Circe Energy deal, sits alongside investments in zero emission platforms through Accelera. At the same time, investors need to weigh softer recent earnings, insider selling, legal and regulatory risks and a relatively rich P/E, which makes understanding Cummins’ risk reward trade off especially important here.

Cummins’ steady dividend growth, 20.8% return on equity, and expansion into data center and zero emission power hint at a story that the headline P/E does not fully explain. Start with the 1 key reward and 1 important warning sign.

Overview: Rockwell Automation helps manufacturers automate and digitize their factories, supplying hardware like sensors and drives alongside software, cybersecurity and consulting services so customers in sectors such as automotive, semiconductors, food and beverage, and energy can run smarter, more efficient production lines.

Operations: Rockwell Automation generates US$4.0b from Intelligent Devices, US$2.6b from Software & Control and US$2.2b from Lifecycle Services.

Market Cap: US$51.9b

Rockwell Automation draws interest from dividend growth investors because it ties recurring software and services revenue to the long term shift toward smarter factories, while keeping a record of regular dividend increases backed by high margins and strong return on equity. The Fed’s hawkish tilt and higher rate expectations put its elevated P/E and meaningful debt in sharper focus, since more expensive borrowing can test leveraged balance sheets. At the same time, Rockwell is raising its full year earnings outlook, investing heavily in AI enabled automation, cybersecurity and smart manufacturing, and authorizing sizeable buybacks. Together, these factors indicate that management sees demand for its solutions as durable, and how those strengths stack up against valuation and interest rate risk is where the real story gets more interesting for Rockwell Automation.

Rockwell Automation’s mix of premium P/E, debt and growing AI enabled automation raises a sharp question for dividend investors, and the real twist sits inside the 1 key reward and 1 important warning sign

Overview: Deere is a global equipment manufacturer best known for its green farm machinery, providing tractors, harvesters and precision agriculture tools, as well as construction, forestry and turf equipment, plus financing solutions that help customers buy and run this gear.

Operations: Deere generates about US$17.1b from Production & Precision Ag, US$11.4b from Small Ag & Turf, US$13.2b from Construction & Forestry and US$6.2b from Financial Services, with the United States its largest region at US$24.5b of revenue followed by Western Europe at US$7.3b and Latin America at US$5.4b.

Market Cap: US$158.0b

Deere gives dividend growth investors exposure to global agriculture and construction at a time when higher for longer Fed policy is rewarding companies with solid cash generation and resilient end markets. The company combines a long history of dividend increases with forecast earnings growth of about 17% per year and a projected 24.6% ROE, while benefitting from tariff relief, tariff refunds and stronger recent results in Small Ag & Turf and Construction & Forestry. On the flip side, a relatively high P/E, pressured margins and a funding model that leans on external borrowing mean higher rates are not a free pass. That tension between quality, income potential and interest rate risk is where the real Deere story starts to get interesting.

Deere’s mix of strong cash generation, global equipment demand and forecast 17% earnings growth with a projected 24.6% ROE hints that the real story is still emerging. The analyst forecasts for Deere could reveal why that strength may also hide a crucial twist investors are overlooking.

The three dividend growth stocks in this article are just a starting point. The full Dividend Growth Stocks screener uncovers 28 more large cap US and Canadian companies with dividend histories, payout ratios and balance sheets that could be just as compelling. Use Simply Wall St to identify and analyze the specific catalysts and narratives that matter to you, so you can focus on the dividend growth ideas that best match your own highest conviction plays.

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Seeking Fresh Alternatives Before They Fly?

Markets move fast, and dividend and growth ideas that look attractive may not stay under the radar for long. To spot fresh momentum and potential breakouts before the crowd, consider exploring these approaches.

• Track companies aiming for resilient cash flows and lower downside risk by scanning the 65 resilient stocks with low risk scores, which focuses on balance sheet strength and disciplined fundamentals.
• Explore potential opportunities related to infrastructure build outs by reviewing the curated 34 power grid technology and infrastructure stocks, which highlights grid upgrades, transmission technology and supporting equipment providers.
• Look for early stage growth stories with robust financials through the hand picked 20 high quality undiscovered gems, which surfaces under the radar businesses backed by solid earnings quality.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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